Volume Outlook and Destocking
Q: When will volumes recover amid destocking?
A: Management expects destocking to abate in the second half of fiscal '24, with volumes becoming more "reasonably flat, flat to up to plus or minus low single digits." They anticipate improvement as they exit the year, particularly in the fourth quarter when comparisons become easier.

Cost Reduction and Earnings Leverage
Q: How are cost actions improving earnings despite lower volumes?
A: The company reduced costs by over $200 million in fiscal '23, including headcount reductions of over 1,200 people. In the first quarter, they took out another $70 million of costs compared to the prior year. These actions have resulted in improved earnings leverage and a more dynamic ability to flex costs amid weaker volumes.

Pricing Strategy and Inflation
Q: Is pricing keeping up with inflation?
A: Their pricing strategy focuses on recovering inflationary costs. While rates of inflation are easing, they haven't seen significant decreases in the cost base yet. As inflation moderates, the pace of pricing will also ease. Beyond that, pricing will be based on delivering value.

Long-term Earnings Growth Outlook
Q: Can you maintain high single-digit EPS growth?
A: Management is confident in their formula that delivered 8% EPS growth over the past decade, expecting volumes to grow 1–2% in a normal environment and generating about 2% productivity gains. They plan to reinvest cash flows into organic growth, acquisitions, and share repurchases to achieve similar earnings growth rates going forward.

Capital Allocation and Deleveraging
Q: How will excess free cash flow be allocated?
A: The company aims to maintain leverage in the 2.5 to 3× range, reinvesting in organic growth with CapEx increasing to 4% to 5% over time. Excess cash will be used for M&A as a priority, and potentially buybacks, while maintaining an investment-grade balance sheet.

M&A Strategy and Industry Consolidation
Q: What is your approach to M&A in current industry dynamics?
A: They focus on bolt-on acquisitions, having completed four small deals in the past 12–15 months. They see value primarily from cost synergies, especially in the current environment, and plan to continue being active in the M&A space.

Impact of GLP-1 Drugs on Demand
Q: How might weight-loss drugs affect packaging demand?
A: Management has seen no impact on demand from GLP-1 drugs. While uncertainties exist about the drugs' adoption rates and effects on consumption, they highlight the food industry's history of adapting to changing consumer needs. Reduction in portion sizes could potentially increase packaging units.

Capacity and Operating Leverage
Q: Can existing capacity handle volume recovery without new investment?
A: They believe they will be well-positioned when volumes return, expecting stronger earnings leverage. While some costs may return (like adding shifts), many reductions are structural, and the existing footprint can absorb incremental volumes without significant investment.

Destocking in Healthcare Segment
Q: Why will healthcare destocking continue into second half?
A: Due to prior supply constraints and raw material shortages, customers built up inventories in healthcare, especially medical devices. Now that raw materials are available, customers are working down inventories—a trend expected to continue into the second half.

Sustainability Goals and Recyclability
Q: Will you achieve 100% recyclable packaging by 2025?
A: The company is committed to closing the gap, reducing the non-recyclable portion to 11%, down 6% from last year. Some sophisticated structures may take longer, but they haven't wavered in their ambition to reach 100%.

Protein Packaging Market
Q: What's the outlook for protein packaging business?
A: It's early days in their protein packaging journey, with modest business gains. Meat sales have been weak due to a down cycle, but they are confident in their value proposition and see it as a long-term opportunity.

Restructuring Costs and Hyperinflation
Q: What drove higher restructuring and hyperinflation costs?
A: Restructuring costs relate to spending about $170 million from Russia proceeds on plant closures and SG&A rightsizing; these costs will continue through the year. The hyperinflation impact was due to a devaluation in Argentina affecting monetary assets.

Customer Promotions and Volume Recovery
Q: Are customers increasing promotions to drive volumes?
A: Anecdotally, some customers are considering a shift towards driving volume, but the company hasn't seen it yet and isn't relying on it for second-half earnings, which aren't predicated on improved demand or increased promotions.

Pricing Pressure in U.S. Protein Market
Q: Is overcapacity leading to acute price pressure in protein packaging?
A: They don't see increased pricing pressure in the protein segment compared to the past. Assets are fungible across categories like dairy, and they don't view the market as overly capitalized or with excess capacity.

Balance Sheet and Leverage
Q: Will leverage stay within target if volumes don't stabilize?
A: They finished the quarter with net debt of $6.5–$6.6 billion and leverage at 3.3×, expecting it to normalize to 3× by end of June, even if volumes don't stabilize, due to seasonality and working capital improvements.

New Product Adoption and Pricing Premiums
Q: How are new sustainable products performing?
A: Early-stage products like AmLite, AmSky, and AMPrima are generating real sales in the low tens of millions of dollars, with meaningful customer adoption, underscoring excitement about these platforms.

Cost Savings: Temporary vs. Structural
Q: How much of cost savings are temporary vs. structural?
A: While some cost reductions may reverse with volume return (like adding shifts), overhead reductions and procurement benefits are expected to be sustained. They don't view the entire quantum of cost savings as temporary.